Buying Property

Andorra - Buying Property

Millions of tourists are drawn to Andorra each winter by the good skiing facilities and each summer by the alpine sports on offer there. The small country’s location, between France and Spain, means there is easy access to large cities, Mediterranean resorts and well-connected airports in less than three hours, even when travelling throughout mountainous terrain, as well as access to a smaller airport less than ten minutes from the border. As a result, Andorra is desirable to property seekers from across Europe.

The property market in Andorra is usually stable and ownership rights are heavily protected by law. Although the nation is not a member of the European Union (EU) or the European Economic Area (EEA), it is part of the Eurozone. That means properties are bought and sold in euros, making currency transaction costs one less thing to worry about for buyers from other Eurozone countries.

Andorra has another major advantage to offer property buyers; low taxes. These attract wealthy individuals looking to relocate for fiscal purposes, who can apply for residency if they invest more than €400,00 in property and other investments.

In addition, the low taxes are also a benefit for those buying a second home. Even with an annual levy to pay for local services plus an annual property tax which is paid by the owner even if a tenant lives in the property, the annual tax bill is lower than it would be for similar properties in other European countries. The general cost of living is also advantageous, with many goods cheaper to buy than they are over the borders.

Until 2012, it was the case that non-residents could only buy one or two Andorran properties. The law was changed so now any foreign individual or company can purchase as many properties in Andorra as they choose, as long as the individuals are over 18, have ID and an Andorran bank account.

Risks To Be Aware Of When Buying Property In Andorra

The government of Andorra actively promotes economic development, and the country is home to a healthy financial industry. However, the small overall land mass and mountainous terrain mean all development must be small scale. Large cities, huge factories, skyscrapers and massive stadiums do not fit into the possibilities of this landscape. In fact, strict planning regulations mean the size and appearance of all new buildings undergo detailed scrutiny, adding further restrictions.

Whilst this means property retains a healthy value, traditional economic growth driven by economies of scale and large populations is unlikely to happen here, meaning Andorra will not become the next London or New York. With high property prices but strict regulations on rentals, the rental yields are quite low compared to other places. Rental contracts are normally for five years, with price increases restricted to the rate of inflation. This reduces the chance to test the market for new tenants paying higher rents. Meanwhile, buyer demand is fairly constant.

Therefore, your Andorran property is unlikely to soar in value above other locations, although generally prices do rise each year unless exceptional circumstances dampen international investors. Turnover of properties in Andorra can take some time, as matching buyers to dream homes is harder, given that there are fewer of each compared to busy cities.

Following the global economic crisis of 2008, there was a period where many skiing flats and chalets in Andorra were put on to the market by their international owners. Since these represent a significant part of the Andorran housing stock, and the market for ski accommodation took several years to recover, the properties sat vacant for a long while. The market started to recover in 2013. The potential costs of running a vacant property need to be part of your calculations before you buy.

In addition to market conditions, the Andorran government has implemented a tax regime designed to limit property speculation. When a property is sold, the profits will be taxed according to how long it was owned. If you sell within the first year of ownership, for example, the tax bill will be 15 percent of the profits. This falls to 10 percent by the time you have owned the property for less than three years, and reaches zero after 12 years. If you sell the property and invest the money entirely in Andorra, you will avoid whatever tax bill is due in relation to your property profit.

So be careful to buy a property that meets your needs as a resident or holidaymaker and not just as an investment. It is likely to retain and improve its value over time, but is unlikely to become an easy-to-dispose-of cash cow.

How To Buy A Property In Andorra

All property in Andorra is sold through real estate agents accredited by the official association AGIA. Roughly two hundred agencies have been registered, but only about a quarter of that number operate a routine business. You should be able to find an English-speaking agent without difficulty, and their accreditation means you can be confident of market standards being upheld. You won’t be asked to pay the agent, as the other party will pay a commission of roughly five percent of the purchase sale price on completion of the property transfer.

Similarly, all solicitors must reach certain standards in order to be qualified, and must obtain all relevant insurance to protect clients should anything go seriously wrong. If you employ the services of an Andorran solicitor’s practice, the staff working on your behalf will know the local systems, the area where the property is located and the people to contact if there are queries or hold ups. You should choose a solicitor independently rather than one referred by the real estate agent, to ensure your interests are the only priority.

When viewing properties, assess any hidden costs. Apartment blocks require maintenance inside and out which must be paid for by each unit, and communal entrances must be regularly cleaned. You may be asked to pay one percent of the purchase price to a maintenance fund, plus additional annual contributions. Remote chalets may be on the end of a private road which gets damaged each snowy winter and then require repair. If there isn’t parking on site, how much are the charges for the local community car park?

Once you have found a property you want to buy, you pay 10 percent of the purchase price to your firm of solicitors, who will pay it across to the solicitors acting for the current property owners. This is your deposit, which will now be forfeit if you pull out without good reason.

Your solicitor will perform a number of checks, including one to ensure the title does legally belong to the seller. The solicitor will look careful at the ownership of the land on which the building sits, any shared ownership or maintenance issues especially in apartments blocks, and any other regulations which affect the property. You can expect these checks to take a couple of months to be fully completed.

During this time, written government approval for the sale and purchase of the property will be obtained by the seller’s solicitor.

The transfer of the title, or Excripta Publica, will happen once all the checks are completed, the balance of your purchase price is ready, and all parties are set to complete. A government notary will oversee the signing of the contracts, for which a fee will be charged. The notary maintains the register of property ownership, which is accessible only to the few notaries working in Andorra and therefore cannot be consulted by third parties investigating property ownership.

In addition to the property purchase payment to the seller, you will also be required to pay taxes of two percent to the local parish and a further two percent to the government, as well as the notary’s fee.

The solicitor’s practice should also be paid on the same day, according to the amount agreed in writing at the beginning of the work. The amount depends on the value of the property you have purchased, and will be a percentage within overall price bands.

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